Rent or Buy
Compare wealth growth when renting vs. buying a home.
Basis: State real estate transfer taxCalculated in your browser – your inputs are not transmitted and are kept on this device only if you choose
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What a similar home costs to rent.
Price = 27.8 annual rents – rather expensive (25+)
I have € of equity, live in and plan for years.
Adjust assumptionsRate 3.5% · appreciation 3% · return 5%
Share of the purchase price, usually 1–2%
Renters invest equity and savings
Buying pays off from year 9
Compared is wealth: property value minus remaining debt versus invested equity and invested savings.
Wealth difference after 20 years
€88,346
€88,346Buying leaves you with €88,346 more wealth after 20 years than renting and investing.
Buyahead
- Monthly at the start
- €2,215
- Purchase costs
- €32,296
- Interest in the period
- €188,269
- Wealth after 20 years
- €569,405
Rent
- Monthly at the start
- €1,200
- Invested equity
- €80,000
- Forgone return when buying
- €185,658
- Wealth after 20 years
- €481,059
RZ-26 · headon.pro
When does buying catch up?
Wealth of both options over 40 years. Drag the point to change your horizon.
What you can do
With 1% less appreciation: Rent ahead by €39,720
With your assumptions: Buy ahead by €88,346.
With 1% more investment return: Buy ahead by €7,702
With your assumptions: Buy ahead by €88,346.
How this was calculated
Purchase costs €32,296 (state real estate transfer tax, notary and land registry under the GNotKG, agent), financing need €352,296.
Each year: buy = property value − remaining debt; rent = invested equity plus the yearly difference in housing costs, compounded at the assumed return.
Real estate transfer tax per federal state; other values are your assumptions.
Rent vs. Buy: Making the Right Decision
The question rent or buy? is one of the most important financial decisions in life. Our calculator compares both options over your chosen time period and takes all relevant costs into account.
The comparison is complex: while buyers build up equity in the property, renters can invest the savings (lower monthly costs) and the capital not tied up in the capital markets.
What speaks for buying?
- Building equity
- With every repayment, you build up equity. Once the loan is paid off, the property is yours.
- Inflation protection
- Property values tend to rise with inflation over the long term, while your loan payment stays fixed.
- Living rent-free in retirement
- Once the loan is paid off, your biggest monthly expense disappears - important for retirement.
- Freedom to renovate
- In your own property you can renovate, remodel and design it however you like.
Example calculation: €400,000 property vs. €1,200 rent
The most important factors
- 1Price-to-rent ratioPurchase price / annual rent. Below 20 = cheap, above 25 = expensive.
- 2Investment horizonThe longer you stay, the more buying pays off (closing costs are spread over more years).
- 3Interest rate levelLow interest rates make buying more attractive. Every extra percentage point means many thousand euros in additional costs.
- 4Capital market returnThe higher the alternative return, the more attractive renting becomes.
- Purchase price
- €400,000
- Closing costs (approx. 8%)
- €32,296
- Equity
- €80,000
- Financing required
- €352,296
- Total interest (20 years)
- approx. €188,000
- Property value (2% p.a.)
- approx. €594,000
What speaks for renting?
Renting offers flexibility and preserves capital. Especially in expensive cities with high price-to-rent ratios, renting can be financially more sensible.
Advantages of renting
- Flexibility
- Easier to relocate for a job change, growing family or lifestyle change.
- No concentration risk
- Your wealth is not concentrated in a single property.
- Capital stays available
- Equity can be invested in a diversified way (ETFs, stocks, etc.).
- No maintenance
- Repairs and renovations are the landlord’s responsibility.
Disadvantages of renting
- Rising rents
- Rents often rise with inflation. Over 20 years, rent can double.
- No home in old age
- In retirement, you still have to pay rent - on a lower income.
- Uncertainty
- Terminations for personal use or rent increases can cause stress.
- No wealth building
- Rent payments are gone - you don’t build any tangible assets.
Frequently asked questions about renting vs. buying
Everything important about the price-to-rent ratio, break-even and opportunity costs
What is the price-to-rent ratio?
The price-to-rent ratio indicates how many years of rent the purchase price corresponds to. Formula: purchase price / annual rent. A ratio below 20 is considered cheap, above 25 expensive. In Munich it is often 30+, in structurally weaker regions around 15.
What are the opportunity costs of buying a property?
Opportunity costs are the returns you forgo when you invest your equity in a property instead of the capital markets. With €100,000 equity and a 5% return, that would be approximately €165,000 in forgone profit after 20 years.
From when does buying pay off?
That depends on many factors: price-to-rent ratio, interest rate level, investment horizon and value appreciation. Rule of thumb: with a horizon under 10 years and a high price-to-rent ratio (>25), renting is often better. With 15+ years and a ratio below 20, buying pays off.
Which costs are often forgotten?
Many people forget: closing costs (7-15% of the purchase price), maintenance (1-2% p.a.), property tax, reserves for repairs, and possibly service charges for a condominium. These costs significantly reduce the return of a property.
How does the interest rate affect the comparison?
Low interest rates make buying more attractive because the monthly payment decreases. At 3% interest, over 20 years you pay almost as much in interest as in principal. Every percentage point less interest saves approximately €3,000 per year on a €300,000 loan.